Equity Markets
U.S. stock futures were lower early Monday as investors brace for an expected U.S. interest rate hike later in the week. On Bay Street, futures were negative as oil prices notched lower. Overnight, world markets were mired in the red with MSCI's 47-country index of world stocks trading lower for the fifth straight day.
"Markets are expected to have a quiet start to the week with no high impacting data on the economic calendar," London Capital Group's Jasper Lawler said in an early note.
"However, with the G20 finance minister's meetings in Buenos Aires on Monday and Tuesday no doubt searching for ways to avoid a global trade war, a barrage of high impacting data from both sides of the Atlantic across the week, central bank decisions from the Fed and the (Bank of England) and the start of the EU Summit, the volatility that we have seen since the beginning of February is likely to pick up again heading towards mid-week."
The week's key event is Wednesday's Federal Reserve decision on interest rates. The markets have priced in an increase and the question is now how many more rate hikes follow this year with analysts split on a total of either three or four for 2018.
On the corporate front, U.S. retailer Nordstrom is making headlines in Canada on news that the company is finally set to open its Nordstrom Rack stores in this country after three years of delays. The first of the stores is slated to open Thursday in the Vaughan Mills mall north of Toronto. As many as 15 are expected to open in Canada, with six set to launch this year, The Globe's Marina Strauss reports.
In earnings, Canadian Solar is scheduled to report results ahead of the market open. Four analysts polled by Zack's Investment Research are expecting to see earnings per share for the December quarter of $1.03.
On Wall Street, trade concerns continue to weigh on investor sentiment. A group of 45 U.S. trade associations representing some of the biggest companies in the country have urged U.S. President Donald Trump not to impose tariffs on China. In a letter, the group cautioned that such a move could be "particularly harmful" to the U.S. economy and American consumers. The group sent the letter on Sunday.
Shares of Facebook were down about 4 per cent after reports that the personal data of 50 million users were misused by a political consultant. Facebook vowed a "comprehensive internal and external review."
On the earnings front, Oracle Corp. releases results after the close. Analysts are expecting adjusted profit of 72 US cents a share for the latest quarter, up from 69 US cents a year ago. Oracle posted net income of 53 US cents a share in last year's quarter.
Overseas, the coming Fed decision weighed on shares in both Europe and Asia. The pan-European STOXX 600 was down 0.68 per cent at last check, with most sectors in the red. Britain's FTSE 100 was down 1.25 per cent in early going. British tech firm Micro Focus was among the indexes big losers, falling more than 55 per cent after its CEO departed and the company cut its revenue outlook. Germany's DAX was off 1 per cent and France's CAC 40 fell 0.73 per cent.
In Asia, markets were mixed. Japan's Nikkei fell 0.90 per cent. Hong Kong's Hang Seng edged up 0.4 per cent. The Shanghai Composite Index advanced 0.30 per cent.
Commodities
Crude prices were lower early on after the latest figures showed a rise in U.S. drilling, again raising concerns about market oversupply. Brent crude was down and had a day range of US$65.73 to US$66.12. West Texas Intermediate was also weaker with a range for the day of US$61.94 to US$62.28.
On Friday, energy services firm Baker Hughes reported that U.S. drillers added four new rigs last week, bringing the total online to 800. Desjardins Capital Group noted that the figures represent a reversal of the previous week's figures.
"However, the recent trend suggests that drilling activity has stabilized, which should be viewed positively by a market that appears to be growing more sensitive by the day to U.S supply," Desjardins said. "North of the border, drilling activity is in full retreat ahead of spring break-up with 54 rigs pulled this week, primarily on the oil side."
Reuters notes that rising U.S. drilling activity has pushed up U.S. crude production by more than a fifth since mid-2016 to 10.38 million barrels a day. That puts it ahead of top exporter Saudi Arabia Only Russia produces more, at around 11 million barrels a day. However, U.S. production is expected to top Russia's output later this year.
Also affecting markets on Monday was a report from Russian oil giant Rosneft that fourth-quarter 2017 liquid hydrocarbon production hit 56.51 million tonnes, raising its full-year output by more than 7 per cent.
Currencies and bonds
The Canadian dollar continued to struggle in early going - although the loonie was off session lows at last check - as expectations of a U.S. interest rate hike later in the week helped bolster its U.S. counterpart. The day range on the loonie so far is 76.19 US cents to 76.46 US cents, with the dollar near the top end of that range as the market open approached. The low end of the range marks the loonie's weakest showing since June.
Sue Trinh, RBC's head of Asia FX strategy, said in note that the week's key events for the loonie are scheduled for late in the week, with inflation and retail sales reports set for release on Friday.
"The average of the BoC's three core measures (1.83 per cent in January) has been rising steadily since mid-2017 and this is expected to continue in February," she said. "This release will be watched closely in the months ahead as the market assesses the impact of higher interest rates on the Canadian consumer, who is carrying record levels of debt."
She also noted that Bank of Canada senior deputy governor Carolyn Wilkins is scheduled to speak on Thursday "with housing and household debt likely to serve as some of the discussion points."
In other currencies, the U.S. dollar index, which weighs the greenback against a basket of currencies, had been higher through the predawn hours but shifted a touch lower as the North American open neared. The index was at 90.083 at last check, down 0.17 per cent. On Friday, the index hit a two-week high near 90.38.
Wednesday's rate announcement marks new Fed chair Jerome Powell's first policy meeting. Bond markets have already priced in a rate increase followed by two more later in the year. The markets will be paying close attention to the Fed statement as some analysts speculate that a four hike could be in the cards this year.
In bonds, the yield on the 10-year note was higher at 2.865 per cent. The yield on the 30-year note was also higher at 3.101 per cent.
Stocks set to see action
TransCanada said Monday it sees no material financial impact from proposed U.S. pipeline tax changes. Last week, the U.S. Federal Energy Regulatory Commission (FERC) said it would eliminate a tax break for owners of certain interstate pipelines. Shares of both TransCanada and Enbridge fell on the initial report.
Apple Inc. is designing and producing its own device displays for the first time, using a secret manufacturing facility near its California headquarters to make small numbers of the screens for testing purposes, according to people familiar with the situation. The technology giant is making a significant investment in the development of next-generation MicroLED screens, say the people, who requested anonymity to discuss internal planning. MicroLED screens use different light-emitting compounds than the current OLED displays and promise to make future gadgets slimmer, brighter and less power-hungry.
Alphabet Inc's Google routinely fields product queries from millions of shoppers. Now it wants to take a cut of their purchases, too, according to Reuters. Alphabet is teaming up with retailers including Target Corp, Walmart Inc, Home Depot Inc, Costco Wholesale Corp and Ulta Beauty Inc. Under a new program, retailers can list their products on Google Search, as well as on the Google Express shopping service, and Google Assistant on mobile phones and voice devices. In exchange for Google listings and linking to retailer loyalty programs, the retailers pay Google a piece of each purchase, which is different from payments that retailers make to place ads on Google platforms.
Facebook said on Sunday it was conducting a "comprehensive internal and external review" to determine if the personal data of 50 million users that was reported to be misused by a political consultant still existed. The company said in a statement that it was trying to determine the accuracy of allegations that a researcher gave the firm Cambridge Analytica inappropriately obtained Facebook user data starting in 2014. In the statement from Paul Grewal, a Facebook vice president and deputy general counsel, the company said it was committed to "vigorously enforcing our policies to protect people's information." Facebook shares were down more than 4 per cent in premarket trading.
Billionaire investor Carl Icahn is jumping in to the fight for control over Newell Brands, buying a minority stake in the consumer products company that has been targeted by activist investor Starboard Value LP. Newell said Monday that it's struck a deal in which Icahn will nominate four people to its board, including his son, Brett Icahn. Shares of Newell Brands Inc., based in Hoboken, New Jersey, jumped more than 4 per cent before the opening bell Monday.
More reading: The greying of Canada and why it's time for a new strategy for investors
More reading: The Globe's stars and dogs for the week
Economic News
The G20 Finance Ministers and Central Bank Governors meeting in Buenos Aires for two days.
With files from Reuters, The Canadian Press and The Associated Press